NZ dollar rises on optimism about domestic, global recovery

The kiwi was trading at 65.13 US cents at 5pm. Photo / 123RF

The New Zealand dollar continued its march higher on optimism the global economy is recovering from coronavirus inspired lockdowns and as Prime Minister Jacinda Ardern confirmed this country will return to normal from midnight, although the borders remain closed.

The kiwi was trading at 65.13 US cents at 5pm in Wellington, down from the post-lockdown high at 65.37 cents about midday but up from its close in New York on Friday at 65.07 cents. The currency gained more than 5 per cent last week.

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Ardern said that, 75 days after the near total lockdown imposed just before midnight on March 25, the government is confident NZ is Covid-free.

"We will see the virus here again," she said. This will be inevitable and won't be a failure of the elimination strategy, she said.

That means everything from shops and restaurants to public transport and cinemas can return to normal operations, but international travel to and from the country remains unavailable without special permission.

Ardern's announcement followed earlier official advice that NZ hasn't had a case of Covid-19 infection for 17 consecutive days.

Mike Shirley, a dealer at Kiwibank, said the market was unmoved by the announcement because it had been so well-anticipated.

"That was the squishy, sock-shaped Christmas present – you knew exactly what it was," Shirley said.

The New Zealand dollar had been trading at 64.84 US cents at 5pm in Wellington on Friday. Its after-hours rally was inspired by US non-farm payrolls data showing that, against all expectations, the US economy added 2.5 million new jobs in May. Economists had expected a decline of 7.7 million jobs.

"Everyone really struggled to explain it – if you can't explain something, then you probably shouldn't be trading on it," Shirley said.

But financial markets did trade on it, pushing riskier assets higher, with the US benchmark S&P 500 Index gaining 2.6 per cent and the futures suggesting a further rally later today.

Data from China on Sunday showed that country's exports fell a less-than-expected 3.3 per cent in May when economists were expecting a 7 per cent drop. That added fuel to the positive sentiment driving the kiwi higher.

Shirley said worsening trade and diplomatic relations between the US and China remain a risk for the kiwi but "it seems to have been broadly ignored through the last week."

The New Zealand dollar was trading at 93.47 Australian cents from 92.97 cents at 5pm on Friday. It was at 51.25 British pence from 51.42 pence, at 57.69 euro cents from 57.15 cents, at 71.30 yen from 70.78 yen, and at 4.6145 Chinese yuan from 4.6032 yuan.

The trade-weighted index was at 72.03 from 71.73.

The bid price on the two-year swap rate was 0.2200 per cent from 0.2325 per cent, while 10-year swaps were at 0.8675 per cent from 0.8500 per cent on Friday.